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House passes bill aimed at Chinese currency

NEW YORK (CNNMoney.com) -- Lawmakers say China's currency is unfairly cheap and passed a measure Wednesday that opens the door to tariffs that aim to help U.S. companies compete.

The legislation, which authorizes the Commerce Department to impose duties on imports from countries with undervalued currencies, passed the House of Representatives by a vote of 348 to 79. The Senate, however, is not expected to take up the issue until later this year.

The bill got support from both sides of the aisle, a rarity in recent sessions, with Democrats framing the legislation as a jobs issue.

"We can talk, or we can act. International trade is a high stakes, cut-throat business, and every time we simply talk, the other side acts, and every time they act, an American loses a job," said Rep. Xavier Becerra, D-Calif.

China said this year it would allow its currency, the yuan, to trade in a wider range against the dollar. But the currency has scarcely appreciated since then, inflaming critics who charge the undervalued yuan helps steal U.S. manufacturing jobs.

Estimations on the undervaluation of the yuan vary depending on the economic model used, but one estimate by the Peterson Institute of International Economics puts the number at about 24% against the dollar.

That undervaluing makes Chinese goods cheaper to buy in the United States and likewise drives up the price of U.S. goods sold in China.

Jiang Yu, spokeswoman for China's Ministry of Foreign Affairs, derided Congress for engaging in protectionist acts that could pose a threat to the international economy.

"We firmly oppose the U.S. Congress approving of [this] bill," said Yu in Beijing. "Exercising protectionism only severely damages the relationship and [has a] negative impact on both economies and the global economies."

When asked if China had any retaliatory measures planned, she said, "We have made our position clear to the U.S. side."

The House vote caps years of frustration for lawmakers as the United States has continued to shed manufacturing jobs, and promises of reform from the Chinese have failed to result in policy changes.

"If this risks upsetting the People's Republic of China, so be it," said Ohio Democrat Tim Ryan. "Whether you're a Democrat or a Republican, a liberal or a conservative -- millions of good-paying jobs have been lost and hundreds of thousands of families across this country have suffered as a result of China's unlawful trade policies."

The legislation now moves to the Senate.

"We must take decisive action against China's currency manipulation and other economically injurious behavior," Sen. Charles Schumer, D-N.Y., said on Tuesday, noting that the Senate will take up the issue when it reconvenes later this year.

"China is merely pretending to take significant steps on its currency," Schumer said. "This sucker's game is never going to stop unless we finally call their bluff."

But trade groups and unions cheered the bill's passage. AFL-CIO President Richard Trumka issued a statement of support and Scott Paul, the director of the Alliance for American Manufacturing echoed the message.

"This is one of the most pleasantly lopsided trade votes in recent history," Paul said in his own statement. "Voters are mad and Congress is finally responding.

Earlier on Wednesday, President Obama addressed the issue at a town hall-style meeting.

"The reason I'm pushing China about their currency is because their currency is undervalued," he said, adding that "people generally think they are managing their currency in a way that makes our goods more expensive to sell there and their goods cheaper to sell here."

The resulting imbalance is a major factor contributing to the U.S. trade deficit, the president said.

Last week, Obama urged Chinese Premier Wen Jiabao to speed up the revaluation of the yuan, telling him in a two-hour meeting at the United Nations that the slow pace of reforms was affecting both global and U.S. economies.

The meeting on the sidelines of the U.N. General Assembly followed a speech by Wen the night before in which he told the business community in New York that China will continue reforming and opening its markets under a policy it started in 1978 by officially ending decades of isolation.

However, demands by U.S. lawmakers that China revalue its currency by more than 20% would bankrupt Chinese companies and lead to "major unrest" in his country, Wen said in the speech.